The economic climate in the UK has been tough on small and medium sized Businesses in recent years. Many businesses that may have traditionally turned to banks for finance have found greater success and choice with alternative finance sources such as crowdfunding and peer-to-peer lending. The UK’s alternative finance sector broke the £1bn barrier for the first time in 2013 as it became an increasingly popular and viable choice for businesses.
For accountants and finance brokers, the slowdown in bank lending has increased the need for them to become familiar with lending sources beyond traditional loans and overdrafts Business finance intermediaries are in a stronger position than ever to recognise the value and opportunity offered by alternative finance and to help their clients survive and grow. In turn, they can earn commission and generate new business for their practices.
Relieving the Strain of Cashflow Management
The reasons for clients needing cashflow finance are, of course, varied. These needs may become particularly acute when a client’s largest customers dictate the payment terms and make them painfully long.
With extended credit terms affecting most businesses across the UK, businesses have good invoices in the tens or even hundreds of thousands sat awaiting payment. While these businesses will eventually see the cash, the immediate need for working capital to manage accounts payable and staff costs, or to support operational growth plans, creates the need to accelerate income.
Modern Invoice Finance On Their Terms
Invoice finance is not a new concept – invoice discounting and factoring have been around for many years, and have succeeded in supporting tens of thousands of businesses in managing their cashflow.
As with everything in today’s world – businesses now want more flexibility and choice – Invoice discounting and factoring are traditionally seen as restrictive products – involving long locked-in contracts, high fees, and in many cases commitment of the entire sales ledger. As such, many advisers’ clients have been deterred by the lack of control and unfavourable terms inherent within these products.
Encouragingly for advisers and their clients alike, a relatively new invoice finance product in the form of invoice trading has been created to remove these onerous restrictions and put control firmly back into the hands of business owners.
Coined as ‘modern invoice finance’, the flexibility and choice offered by invoice trading allows a business to decide which, and how many, invoice are traded – and lets the client set the maximum price it is willing to pay.
Where invoice discounting and factoring may have involved one, two or three year contracts, invoice trading requires no long-term commitment and can put cash into the hands of businesses within a day of the invoice auction closing.
Businesses are now rapidly recognising the opportunity that invoice trading offers. The invoice trading transaction volume for 2013 totalled £97m, representing a 487% increase on the 2011 figure. What’s more, 60% of small businesses in the UK have now used, or plan to use, alternative finance in the foreseeable future.
Supporting Growth
The objective of any adviser is to give clients the solution they need, while generating revenue and sales growth for their own business at the same time.
With Invoice Trading, advisers can introduce their client to a truly empowering solution and earn commission every time their client successfully trades an invoice. As an affordable, attractive and evolved product for advisers to add to their product portfolio, new business and higher returns can be generated.
The key to growth and success of any adviser’s business is the success and growth of its clients. Confidence is now starting to grow in the UK once more – invoice trading is driving down the cost of finance for SMEs, encouraging financial stability and allowing advisers to reap their own rewards.
This article is written by Beth Nicholas. He is an approved writer for Platform Black – provider of complementary and alternative finance solutions including invoice finance, supply chain finance and channel finance.
